When New Jersey Hiked Minimum Wages, Fast Food Prices Rose
As New Jersey ratcheted up its minimum wage on three occasions between 2019 and 2021, fast-food restaurants in the state responded by hiking menu prices to compensate.
In neighboring Pennsylvania, where minimum wage hikes weren’t mandated, those price increases did not occur.
That’s the notable (if perhaps unsurprising) finding reported in a paper published this week. Kerry Papps, an economist at the University of Bradford, and Michael R. Strain, a Georgetown University economist and director of economic policy studies at the American Enterprise Institute, spent three years tracking weekly menu prices at dozens of fast-food joints along the New Jersey–Pennsylvania border. They concluded that every $1 increase to the minimum wage resulted in a 7 cents increase in menu prices.
Those minimum wage increases were a result of a bill passed in 2019 that raised the mandated wage to $15 per hour over five years. The first increase in July 2019 brought the state’s minimum wage up to $10 per hour (from $8.85 per hour), with subsequent $1 per hour increases every January from 2020 to 2024.
Today, New Jersey’s minimum wage is a little more than $15 per hour, thanks to a provision that automatically raises the minimum wage along with inflation. Meanwhile, Pennsylvania’s minimum wage is $7.25, which is the federally mandated level.
Interestingly, the study found that menu price hikes did not occur immediately after the minimum wage increases. Rather, it took an average of about six weeks for menu prices to rise.
This is one of those situations where a picture might be worth a thousand words, so here’s the key result of the study:
Additionally, the researchers found that menu items requiring more preparation work saw slightly larger price increases. Tha
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